interest revenue shall be calculated by using the effective interest method

Ind-AS 109 provides that “interest revenue shall be calculated by using the effective
interest method.” The effective interest method uses the financial instrument’s carrying amount in the books of accounts as the principal value for the calculation of interest.Accordingly, the interest income is recognised in the books of accounts as per the market rate and not the interest rate as per the concessional terms. However, the principal for the purpose of calculation of interest shall be the amortised cost and not the
principal amount outstanding.







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